Serious Illness: Finances and estate planning

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Costly medical bills, the potential need for nursing home care, the possibility of dying, and the need to provide security for a surviving spouse are a few important reasons to get financial affairs in order.

Just as people usually get to a point where they need a health care representative to make decisions when they can’t, it’s wise to appoint someone to make financial decisions should that time come.

Planning ahead ensures that family members will be provided for in the manner of your choosing.

Medicare and Medicaid: Protecting your assets

An important concern of the seriously ill is whether their medical and other care expenses will gobble up resources and leave a surviving spouse with insufficient funds for their own needs. Medicare will pay for limited time in a nursing home provided 24-hour nursing care is required. But people who need long-term assistance and those who need non-medical help such as preparing meals, doing laundry or remembering medications must pay for this care out of their own pockets. This can get very expensive!

Medicaid, the federal government’s program designed for low-income individuals, can be enlisted to pay for extra-care needs. Many people enter a facility as private-pay clients and eventually spend their assets to the point that they qualify for this program. Medicaid then will cover what Medicare doesn’t. However, choices are extremely limited when you are on Medicaid. Qualifying for this low-income program involves specific formulas for countable assets (bank accounts, stock, property) and exempt assets (house, car, belongings). If you need to look into Medicaid as a source of financial assistance, consider talking with an attorney specializing in elder law. He or she can advise you about how to distribute assets in such a way that some still remains for a surviving partner.

Long-term care insurance is an alternative that may help you protect your assets. This form of insurance is designed to pay for skilled and unskilled help for a long period of time. Depending on the terms of your policy, you may receive care in your home, in an assisted-living setting, in a residential care setting, or in a nursing home.

Long-term care insurance is not for everyone, however. It can be very expensive, especially if you are already ill. Unfortunately, the best time to enroll in long-term care insurance is while you are relatively healthy. Age is also a factor. The younger you are, the lower the premiums, but the longer you will likely be paying them. If you would qualify for Medicaid within six months to a year of paying for services on your own, long-term care insurance is generally not considered a worthwhile investment.

Long-term care insurance typically has many restrictions. Shop around carefully for a policy that meets your projected needs. It is not unheard of that a family has paid premiums for years, only to find that the particular circumstances of the condition are not covered by their policy.

To find out more, each state has a State Health Insurance Assistance Program that can offer tips and advice about the purchase of long-term care insurance. Contact the federal Eldercare Locator program toll free at 1-800-677-1116 to find the State Health Insurance Assistance office closest to you

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Power of Attorney: Someone to handle your finances, just in case

During the course of an illness, it may become difficult to get to the bank, file taxes, go to the assessor’s office, or balance the checkbook. Yet to protect you, most financial institutions will not discuss your finances with anyone who is not listed on your account. These circumstances can become a significant problem if you become homebound or bedridden. To alleviate this quandary, consider choosing a trustworthy person to be your “durable power of attorney.” Once you have made your choice, legally all you need to do is fill out a durable power of attorney form available at any stationary store. Be sure to find out if it must be notarized to be valid.

Giving someone power of attorney means that person has the right to make financial decisions in your place. For this reason, you must choose the person with care. If you have any doubts about the individual you have in mind, hold off on making a final decision.

Giving someone power of attorney, however, does not mean you lose control of your finances. You can continue to make all decisions and carry out all your transactions as usual. But if something happens to you and you become incapacitated, the person who has durable power of attorney may act in your stead. You have the option of limiting the person’s rights to managing your banking, taxes, or specific accounts.

You may also revoke durable power of attorney at any time. Simply send a written notice to each of your financial institutions and consultants. (The word “durable” does not mean “forever.” It simply means that if you become mentally incapacitated, e.g., from a stroke or Alzheimer’s disease, the person may continue to make financial decisions for you.) Until a durable power of attorney is revoked, it remains valid as long as you are alive. At such point that you pass on, however, the person serving as your durable power of attorney will no longer have access to your assets or decision-making rights regarding your finances.

Some people choose to open a joint checking account with the trusted person, which is a less-formal arrangement than durable power of attorney. This enables the cosigner to write checks after the death has occurred, which can simplify tasks such as bill paying. This setup does not allow the person to sign your taxes or conduct other legal transactions for you. If you decide you want to change the arrangement, however, it may be a little more difficult to revoke shared access to a joint account than it would be to revoke a power of attorney.

A durable power of attorney can only be granted while the individual who is ill is still mentally sound. If you have a terminal illness, there will likely come a time when you will not be able to make decisions for yourself. Without a durable power of attorney in place, especially if you are not married and you become mentally incapacitated, the courts would appoint someone to make financial decisions for you. This person might be a family member or even an attorney. You can safeguard your estate against a court appointment by selecting a durable power of attorney ahead of time.

If you become mentally incapable and have no legal spouse and no paperwork in place, the court will appoint decision makers for you. In general, two types of decisions must be made-one regarding health and well being and the other regarding finances. A person appointed to make decisions in these two areas is called a “guardian.” A person appointed simply to look after the financial side of things is called a “conservator.” To learn more about power of attorney, guardianships, and conservatorships, talk to an attorney who specializes in elder law.

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